Perry sees windfall in rainy day

Updated 12:59 am, Thursday, January 31, 2013

AUSTIN — Gov. Rick Perry's proposal to tap into the rainy day fund for tax relief could affect revenue long into the future and is a marked change from his repeated insistence that the state savings account shouldn't be used for ongoing expenses.

Perry's recent tax-relief proposal is not fully defined, although he would like it to total $1.8 billion over two years. Of the cost, $840 million would come from the rainy day fund and $960 million from state general revenue.

He has asked lawmakers to amend the state constitution and allow money to be given directly back to taxpayers, saying that would allow a rebate.

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While that idea would allow the tax relief to be a one-time expense, it first would require approval of two-thirds of lawmakers and of Texans on a statewide ballot.

The other possibilities Perry has outlined in his budget plan include lowering the state sales tax rate, adjusting the business tax, creating an additional sales tax holiday weekend or increasing the homestead property tax exemption. He's seeking Texans' feedback.

Lawmakers wouldn't find it easy to raise these taxes when they next meet in two years if they cut them this time.

Williams said he generally supports some additional tax relief, saying: “They need a place at the table, taxpayers do, just like every other group who has lined up in Senate Finance right now.”

Lt. Gov. David Dewhurst said he hadn't examined the details of Perry's plan but that he also wants to see tax relief for Texans on top of what has been approved in past legislative sessions.

Asked about whether it could be a temporary reduction, he said: “I don't have any intention, and I don't think the Legislature has any intention, to reduce taxes and then come back and raise them again.”

Perry, asked about the notion that lawmakers would be unlikely to raise tax rates once they are lowered, said: “Good. That's a good way to keep spending under control.”

The governor brushed aside the idea that tapping into the rainy day fund would be a departure from using it for the one-time investments he has suggested are its proper use, such as his proposal to take $3.7 billion from the fund for water and transportation infrastructure.

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“I think there's enough to do both. You've got $12 billion in that fund, and the state's going to continue to grow. I think it's a really important message to send out across not just the state but across the country that this is a state that is not going to spend all that it brings in, that it actually is going to do some tax relief,” Perry said.

Cutting taxes, however, affects the money available to the state budget at a time when outnumbered Democrats are urging full restoration of funding cut from areas like education two years ago, when lawmakers confronted a projected revenue shortfall.

“I would prefer that we use money from the rainy day fund to replenish and put back the funds that were cut ... I believe that that is a wise investment into the human infrastructure of Texas,” said Rep. Philip Cortez, D-San Antonio.

Rep. Jessica Farrar, D-Houston, said Perry could help local taxpayers by reversing his stand against expanding Medicaid, allowing that program to pick up more health care costs at public hospitals.

Rep. Mike Villarreal, D-San Antonio, said Perry's proposal to use rainy day fund money for tax cuts “certainly does not fit the original intent of the economic stabilization fund. ... The Legislature intended for it to help stabilize the provision of basic essential state services when there is a downturn in the economy.

“The governor is attempting to redefine the purpose of this fund not just from the original intent. He's trying to redefine it from his new definition just last session,” Villarreal said. “His own definition was we only use it to pay past-due bills. Well guess what, we have past due bills and ... he's not proposing that we use it to cover those expenses.”

Rep. Lyle Larson, R-San Antonio, said the House is focused on responsibilities including education, health care and infrastructure demands, applauding Perry for highlighting transportation and water.

Larson said outside of a long-standing discussion about how to change or perhaps eliminate the business tax, which has met criticism from smaller businesses and others since it was overhauled in 2006, “I really don't see any traction in the House” for tax relief measures.

Larson said there's a concern over how tax relief could be individually parceled out to Texans in a fair manner, if a rebate were used.

He said he asked some of the budget-writing lawmakers.

“One of the members said, 'I guess you stand in front of the Capitol, you turn a fan on, and you throw a lot of money in the air,'” he said.

House Speaker Joe Straus, R-San Antonio, said Perry hit the mark in this State of the State speech on education, water and transportation. He said he wants lawmakers serving on budget and tax committees to have a chance to discuss the issue.

“I haven't taken a position on rainy day fund use for anything other than the infrastructure items that we've talked about,” Straus said. “This is the time of the session to have an open mind.”